sales forecasting Flashcards

1
Q

what is sales forecasting?

A

sales forecasting in the projection of achievable sales revenue based on historical data, market trends and sales estimates

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2
Q

Why is sales forecasting useful?

A
  • helps set goals and measure progress
  • helps cash flow planning and financial decision making
  • motivates managers to meet targets
  • helps workforce planning by estimating workforce needs
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3
Q

what factors can impact the accuracy of sales forecasting

A
  • economic factors (inflation, recession)
  • competition (pricing strategies and brand loyalty)
  • unpredictable events (global crises and natural disasters)
  • data limitation (outdated or bias info)
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4
Q

What are the two main types of sales forecasting?

A
  • quantitative forecasting: uses historical data and mathematical models/ statistics
  • qualitative forecasting: uses expert opinion, market knowledge and intuition
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5
Q

How do you calculate a three-point moving average?

A
  1. take three consecutive years of sales data
  2. add the three values together
  3. divide by 3 to get the moving average
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6
Q

How is a scatter graph used in sales forecasting?

A
  • a scatter graph plots past sales data
  • a line of best fit is drawn to show trends
  • a slope helps predict future sales trends
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7
Q

What is extrapolation in sales forecasting?

A
  • extrapolation uses past trends to predict future sales
  • assumes patterns remain stable
  • e.g. is sales increased by 5% yearly, the same growth is expected for next year
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8
Q

what are the different types of correlation?

A
  • positive correlation: sales increase as another factor increases (marketing)
  • negative correlation: sales decrease as another factor increase (higher prices)
  • no correlation: no relationship between sales and the factor analysed
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9
Q

advantages of qualitative forecasting?

A
  • uses market knowledge and expert insight
  • helpful when historical data is limited
  • can identify sudden shifts in consumer trends
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10
Q

what are common qualitative forecasting methods?

A
  • intuition: managers rely on experience and gut feeling s
  • brainstorming: groups discuss trends and market conditions
  • Delphi method: experts provide sales prediction through discussion
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11
Q

How is brainstorming used for sales forecasting?

A
  • employees with market experience discuss future trends
  • past product life cycles and customer feedback is analysed
  • generates new ideas and perspectives
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12
Q

disadvantages of qualitative forecasting?

A
  • subjective and may be biased
  • lacks statistical accuracy
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13
Q

what is seasonal analysis and why is it important?

A
  • examines monthly or weekly sales patterns
  • helps a business prepare for peak sales periods (toys before Christmas)
  • useful for inventory and marketing planning
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14
Q

what is the difference between trends and cyclical analysis

A
  • trend analysis: examines long-term data to determine if sales are increasing, decreasing or stable
  • cyclical analysis: identifies sales fluctuations based on economic cycles (demand for luxury goods rising after recession)
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15
Q

what is random factor analysis in sales forecasting?

A
  • identifies unusual spikes in sales
  • e.g. a sudden ice cream sales increase due to heatwaves not marketing
  • helps business separate random factors from actual trends
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